Peruvian railroad sues former Tenino company over undelivered locomotives

A now-defunct Tenino company owes more than $1.6 million after failing to build locomotives for a tourist railway in Peru, according to a lawsuit filed in U.S. District Court.

Sygnet Rail Technologies had agreed to manufacture four diesel locomotives specifically for PeruRail’s line between Cusco and Machu Picchu, a remote 15th-century mountaintop city that was built by the Inca Empire.

Sygnet Rail accepted a down payment for the first two locomotives in 2014, but went out of business before fulfilling the order. Sygnet Rail apparently defaulted on loans and went into foreclosure in August 2014. A new company called Sygnet LLC took over and assumed all obligations of the contract with PeruRail, according to court documents filed in June.

PeruRail’s down payment was $806,880 for the first two locomotives, along with two more “progress payments” of $403,440 each, according to documents. PeruRail agreed to pay a total of about $2 million per locomotive.

The delivery deadline for the two locomotives was changed to Dec. 31, 2014. Sygnet failed to uphold the deal and has not refunded any money to PeruRail, according to documents.

PeruRail isn’t the only one trying to track down Sygnet. Last July, the state Department of Labor & Industries issued a warrant for $22,479 in unpaid workers’ compensation.

Jerome Mullins, an electrical engineer from Kitsap County, said the company owes him about $30,000. Mullins had been hired to develop a protocol converter, a communication device that makes data compatible between different operating systems.

Mullins said he went to deliver the device in January, only to find the gates locked at the Tenino facility at 5915 Waldrick Road SE.

“They still owe me a ton of money,” Mullins told The Olympian. “I’d like to find them if I could.”

Although he’s frustrated by the breach of contract, Mullins said a lawsuit isn’t worth the cost. Even if he won in court, Mullins doubts he would get paid.

“I think the Peruvians are wasting their money trying to sue them,” Mullins said.

The Olympian left multiple messages seeking comment from Seattle law firm Stoel Rives, which is representing PeruRail in the case. According to the Secretary of State’s Office, the registered agent for Sygnet is Michael Cappy. The Olympian has been unable to contact Cappy or former Sygnet Rail president David Swanson, whose LinkedIn profile reports that he lives in Montana.

Despite Sygnet’s inactivity, Swanson and four other people associated with Sygnet Rail recently received a patent for a locomotive power system. One of those named on the patent is Brian Bertlin, a former chief operating officer at Sygnet Rail who lives on Mercer Island.

Bertlin told The Olympian that he left the company more than three years ago and was does not know why it closed.

“It is (was) a very innovative company in a very traditional industry and was a fun place to work while I was there,” Bertlin wrote in an email.

In 2014, the Railway Gazette reported about the locomotive deal between PeruRail and Sygnet Rail Technologies. In the report, Swanson said the locomotives would provide “an unparalleled level of reliability” and would be “some of the cleanest-emissions locomotives ever delivered to Latin America.”

Other news reports suggest that Sygnet Rail had shown a lot of promise in the international railway industry.

In 2011, The News Tribune reported that the company (then called Global Locomotive) had delivered a fifth diesel locomotive to White Pass and Yukon Route Railway in Skagway, Alaska, which is considered the busiest tourist line in the United States. At the time, the railroad had a contract with the company to bring its old locomotives up to modern standards.

The next year, Sygnet entered an agreement to supply power and control systems for the Sao Paulo Metropolitan Train Company in Brazil, according to The News Tribune.

Sygnet had been leasing a 16,610-square-foot facility that straddles the train tracks just east of Offutt Lake in rural south Thurston County. The land is owned by the city of Tacoma and managed by Tacoma Rail, a short-line railroad that transfers freight cars to larger rail companies for shipment across the United States.

In 2009, the company (then known as Global Locomotive) signed a three-year lease at the facility for $283,725 with options for three additional one-year extensions, according to records.

Alan Matheson, chief mechanical officer for Tacoma Rail, said Sygnet suddenly left the site in January. A search is underway for a new tenant, he said, preferably a business that repairs locomotives and railcars because that is the site’s intended purpose.

This story was originally published November 28, 2015 at 8:59 AM with the headline "Peruvian railroad sues former Tenino company over undelivered locomotives."